The retailer is being replaced by Allegion Plc, a provider of security for homes and businesses, according to a statement released Friday by S&P Dow Jones Indices, which runs the S&P 500 index.
The retailer's downward spiral began during an ill-fated transformation under former CEO Ron Johnson, who was fired in April after 17 months on the job.
The company's stock has rebounded during the last month. There are signs that the retailer's business is stabilizing under Chief Executive Mike Ullman. However, the change isn't enough to keep J.C. Penney in the index.
J.C. Penney's stock has fallen $10.84, or 55 per cent, to $8.87 this year.
The stock has advanced 18 per cent this month after falling to $6.42 on Oct. 21.
Johnson's plan included getting rid of coupons and most sales in favour of everyday low prices, bringing in hip brands and remaking outdated stores. But the changes that were meant to attract younger, wealthier shoppers, wound up turning off its loyal middle-income, middle-age customers who favour sales and basic merchandise like loose-fitting khakis
J.C. Penney will join the S&P MidCap 400. The change will become effective after the stock market closes on Nov. 29.